Reducing barriers for e-business in SME’s through an open service oriented infrastructure

ICEC’06Tuesday August 14nd 2006Fredericton, New Brunswick, Canada

Mikkel Hippe Brun (mhb@itst.dk)Christian Lanng (chl@itst.dk)National IT- and Telecom AgencyMinistry of Science, Technology and Innovation

eGovernment in Denmark – today

1st place(The Economist)

3rd place(OECD/Accenture)

2nd place(UN)

Vision for e-government 2010 50% of all Danish companies are doing full electronic

business 90% of all Danish companies, citizens and public authorities

have a digital signature certificate That the public sector organizations follow Enterprise

Architecture principles and become service enabled (SOA) That we have ONE citizens portal drawing on all the

different service offerings across the public sector That the public sector play an offensive and innovative role

in shaping SOA enablement both in the private as well as the public sector

Enable competition on services rather than infrastructure, formats or vendor lock-in

Source: ”New challenges, New priorities”, ”Danish Globalization Strategy”, ”Strategy for e-government in Denmark”

But there are still barriers towards realizing the SOA nirvana

A survey we did of 600 private companies showed that the main barriers could be divided into 4 groups (KPMG 2005) :

Technical Cost vs. benefit barriers Organizational Legal / Legislative

These barriers were echoed by the IT-vendors and CIO’s we spoke with in the public sector.

Technical barriersInteroperability is a huge challenge

It is not trivial to satisfy the basic conditions for inter-enterprise transactions on a large scale:

Authentication Authorization Confidentiality Integrity Non-repudiation

Toolkits are not mature Standardization

Many different standards Technical standards Data standards (content)

Cost vs. benefit barriersWithout critical mass benefit is small

Existing infrastructure investments for Big Inc. No good business case for moving services from an

existing infrastructure (e.g. EDI) No good business case for establishing new services on a

new infrastructure, who is the first mover? “If it works – don’t fix it!”

Johns one man company MyGarage Technologies on the other hand would prefer to use internet technologies when doing business.

On the other hand – John only saves little time in the handling of his 100 annual invoices and he may not have an incentive to do participate in Big Inc.’s electronic supply chain at all (unless of course everybody else were doing it).

Organizational barriersCritical mass is the key to success

SME’s are needed if critical mass is to be reached Specific barriers to small and medium sized

enterprises (SME) SME’s generally don’t have the capability to participate

in SOA based supply chains i.e. they often don’t have 24/7/365 online message handlers

High barriers to participate in an electronic supply chain with current infrastructure (EDI)

Usability can be a critical issue Installation of software Initialization Complex requirements

Legal / Legislative barriers

Laws on PKI-based digital signatures must be passed

Laws need to be tried in court before mass adoption

Privacy issues National laws may stand in the way

E.g. in Denmark a bilateral agreement must be made between the parties exchanging electronic invoices.

E.g. in Germany a paper trail of invoicing transactions must be kept.

The threat: Integration spaghetti

The case: Danish e-invoicing law

As of February 1th 2005 – all invoices to the public sector has sent electronically

18 million invoices will be exchanged The initiatives is mandated by legislation 440.000 companies affected Scanning agencies handle the conversion of paper invoices OASIS Universal Business Language is the underlying

standard

Total estimated savings in public sector 120 million € per year.

The full picture ultimo 2005

Public authorities

Private companies

Read In Bureaus

VAN

Easy Account system

Full digitalization – a challenge

Electronic Invoices to the Public sector in Denam ark

0

200.000

400.000

600.000

800.000

1.000.000

1.200.000

1.400.000

feb-05

m ar-05

apr-05

m aj-05

jun-05

jul-05

aug-05

sep-05

okt-05

nov-05

dec-05

jan-06

Months

Invo

ice

s

Scanned Invoices

Native XML Invoices

18%12%

19% 22%

41%

100%97% 95%

99% 99% 100% 100%

0%

20%

40%

60%

80%

100%

Allcompanies

(10-19) (20-49) (50-99) (100+) Publicauthorities

Number of employees EDI Internet

Source: Informationssamfundet Danmark 2004, Danish statistics 2004

EDI is a substantial barrier

But why are the SME’s important?(it’s about lowering the barriers for participation, not ignoring the SME’s)

41%

15%

44%

10-19 20-49 50-99

Fordeling af transaktionsvolumen for virksomheder imellem 10-99 ansatte (samlet volumen 191,1 mill. forretningsmeddelser)

KPMG 2005

Distribution of transaction volume for companies between 10 and 99 employees. (Total volume is 191 million orders and invoices)

Invoices - by sector

10%

7%

17%

66%

B2B B2B foreign B2G B2C

Source: "Analyse af besparelses- og innovationspotentiale ved digitalisering af forretningsprocesser" udarbejdet af KPMG, december 2005.

The biggest volume is in the private sector

191 million invoices and orders are exchanged in

companies with 10-99 employees

Goal: A Service Oriented Infrastructure

Build an open, secure, reliable and service oriented internet based infrastructure.

Must encompass the business requirements of both the private as well as the public sector.

Scalable with the ability to handle up to 200+ million transactions per year.

Estimated savings 550-700 million € per year in the private sector, in average half a man year per company.

Strategy for addressing the barriers and reaching the goal Technical

National authoritative service registry National standardization of a web service profile Development of a toolkit which supports the profile

Organizational Public sector as a locomotive establishing and financing a

shared infrastructure: Leadership Take advantage of the current window of opportunity

Legal / Legislative All entities must sign a multilateral contract when registering, at

a central registry Alternative: Passing a law better suited for e-business

transactions Cost vs. benefit

Start with business transactions that have a good balance between cost and benefit for service providers and service consumers

Public authorities

EDI networks

B2Bportals

Banks Internet

Bridging the gap between networks

SME’s

WS* profiles for secure, reliable and authenticated transactions

Shared serviceregistry

Large entreprises

Implementing the vision

SOA within organizations vs. SOA as Inter-organizational infrastructure (SOI)

Traditional SOA approach SOI

Enterprise level or homogeneous clusters of organizations or

business units.

Inter-enterprise level, heterogeneous participants with

varying levels of capabilities

Enable loose coupling of services within the ecosystem

Enables loose couplings of services across organizational

boundaries

Typically aimed at larger enterprises

Aimed at SME’s as well as large enterprises

Wide service-offering ranging from many to few subscribers

Narrow service-offering aimed at high volume many-to-many

transactions

Supports complex user authentification and security

policies.

Uses digital certificates to secure legal binding and non-refutable

encrypted transactions

Typically modelled to fulfill a wide range of requirements in complex

scenarios

Tries to reduce complexity of requirements and offer narrow

generic scenarios

Primary Service

Service

Interface

InterfaceRetrieval of data

Submission of data

Retrieval and manipulation of data

Manipulation of data

Service provider Service Consumer

Naming and Design Rules

Data

Data

Secondary service

Secondary Data

Primary Data

RegistryRepository

SOA – Service Oriented Architecture

Summary Key success factors

Strong business case (e-invoicing as the key service with good balance between cost and benefit)

Political support Window of opportunity (Critical mass already exists) Available deployed PKI infrastructure

Approach We started with a simple service allowing for emergence of

more complex scenarios rather than trying to model all services from scratch

Achievements State of the art WS* profile State of the art supporting OSS toolkits Vendor support from major vendors (MS, SUN, IBM) Establishment of a national service registry for SOI

Future work:

Expanding the infrastructure to other domains Healthcare (Electronic Patient Journals) Records management Tax reporting for companies

New shared infrastructure services Federated Identity and Access Management Attribut service

International cooperation North european working group European Union

Service Oriented Infrastructure:http://www.oio.dk/arkitektur/soa/infrastruktur/english

Legislation and statute on electronic invoicinghttp://www.oio.dk/XML/standardisering/eHandel/materialer/OIOXMLeInvoice

Online Validator:http://purl.oclc.org/NET/OIOXMLeFaktura/validator

InfoStructureBase – repository / registryhttp://isb.oio.dk

Questions

mhb@itst.dkchl@vtu.dk